Ohio Mortgage Loan Information
Boost Your Credit Score
 Pay
your bills on time
This may seem like a no-brainer, but just one late payment
could negatively affect your credit score for years. However,
if you regularly pay your bills on time, your score will improve
dramatically. For example, someone with an average credit
rating of 707 can raise their score by as much as 20 points
by paying all their bills on time for one month.
Eliminate late payments
If you do make a late payment, try contacting the creditor
to ask for a good faith adjustment that will eliminate the
late payment on your credit report. Be patient and understanding
when calling, though. It may take more than one phone call,
and if you're rude, you'll probably be denied.
Keep balances low
The closer your balance is to zero, the more favorable you'll
be scored. Keeping your credit use less than 30% of your credit
limit is the best way to achieve a good score. Maxing out
your credit cards could lower your average score by as much
as 70 points.
Don't cancel your cards
Canceling an account won't make it go away; a closed account
still shows up on your records. In fact, unless the account
was opened less than two years ago and you have over six credit
cards, closing an account can hurt your score. Credit scoring
software assumes people with longstanding credit are less
of a risk to default on payments.
Remember to check your credit score before asking
for a loan. There are ways to improve your score, but the
best way to increase those three little digits is to pay back
on time and in full.
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VA Loans and Eligibility
VA will guarantee a maximum of 25 percent of a home loan
amount up to $89,912, which limits the maximum loan amount
to $359,650. Generally, the reasonable value of the property
or the purchase price, whichever is less, plus the funding
fee may be borrowed. All veterans must qualify, for they are
not automatically eligible for the program.
VA guaranteed loans are made by private lenders, such as
banks, savings & loans, or mortgage companies to eligible
veterans for the purchase of a home, which must be for their
own personal occupancy. The guaranty means the lender is protected
against loss if you or a later owner fails to repay the loan.
The guaranty replaces the protection the lender normally receives
by requiring a down payment allowing you to obtain favorable
financing terms. If you're thinking of purchasing a home in
the Cleveland Ohio area, contact me for more information on
VA loans.
GENERAL RULES FOR ELIGIBILITY
You are eligible for VA home loan veteran benefits if you
served on active duty in the Army, Navy, Air Force, Marine
Corps, or Coast Guard and were discharged under conditions
other than dishonorable after either:
* 90 days or more, any part of which occurred during wartime,
OR
* 181 continuous days or more (peacetime)
TWO YEAR REQUIREMENT
If you:
* enlisted (and service began) after September 7, 1980, OR
* were an officer and service began after October 16, 1981
You must have completed either:
* 24 continuous months or more, OR
* the full period for which ordered to active duty, but not
less than 90 days (any part during wartime) or 181 continuous
days (peacetime)
YOU ALSO MAY BE ELIGIBLE IF YOU:
were discharged for a service-connected disability, or
* were discharged for the convenience of the government after
completing at least 20 months of a 2-year enlistment, or
* completed not less than 90 days (any part during wartime)
or 181 continuous days (peacetime), and* were discharged because
of a hardship, or were determined to have a service-connected
compensable disability, or
* were discharged or released from active duty for a medical
condition which pre-existed service and has not been determined
to be service-connected, or
* received an involuntary discharge or release from active
duty for the convenience of the Government as a result of
a reduction in force, or
* were discharged or released from active duty for a physical
or mental condition not characterized as a disability and
not the result of misconduct but which did interfere with
your performance of duty
* are an unremarried spouse of a veteran who died while in
service or from a service connected disability, or
* are a spouse of a serviceperson missing in action or a prisoner
of war.
ACTIVE DUTY SERVICE PERSONNEL
If you are now on active duty, you are eligible after having
served on continuous active status for at least 90 days. When
an ending date is established for Persian Gulf War service,
a minimum of 181 days of continuous active duty will be required
for persons who did not have wartime service.
MEMBERS OF THE SELECTIVE RESERVE
"Selected Reserve" means the Selected Reserve of
the Ready Reserve of any of the Reserve components which consists
of units and individuals who participate actively in paid
training periods and serve on paid active duty for training
each year. This includes Army Reserve, Navy Reserve, Air Force
Reserve, Marine Corps Reserve, and coast guard reserve as
well as Army National Guard and Air National Guard.
ELIGIBILITY MAY ALSO BE ESTABLISHED FOR:
Certain United States citizens who served in the armed forces
of a government allied with the United States in World War
II.
* individuals with service as members in certain organizations,
such as Public Health Service officers, cadets/midshipmen
at service academies, officers of National Oceanic and Atmospheric
Administration, merchant seamen with WWII service, and others.
Click here for a pre-approval.
Jeffrey A. Borsz
Home Mortgage Consultant
Real Living Mortgage, LLC
28364 Lorain Road
North Olmsted,Ohio 44070
1495 Warren Rd. Lakewood, Ohio
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Here are some new loans and programs Fifth Third
bank has come out with recently. There is also information
on existing types of loans.
Good Neighbor
- 100% financing available so your customers won't need to
put any money down. The greatest part about this loan is there
is NO PMI. This program is tailored toward first time homebuyers
so the interest rate is reduced to help keep their payments
low!
Stated Income
- This loan is perfect for customers who are self-employed.
Sometimes it's hard to get qualified as a self-employed borrower
because of all the tax right offs. This makes the home buying
process a breeze for these customers.
Income\Investment
Property - 90% financing available for rentals or
investment properties! Lakewood, Cleveland, Rocky River, North
Olmsted, Cleveland Heights, etc. All areas of Northeast Ohio.
Home Possible 100 – If you’re
profession is: teaching, law enforcement, Fire department
or medical field, this program provides special real estate/finance
benefits to those employees for contributing to our communities!
FHA\VA - These government
loans are always in high demand and we have a separate underwriting
department specialized for these programs so we can make sure
they are done quick and painless!
With all of these great new programs I am sure I can find
a loan program to fit anyone’s needs. Feel free to call
me for a free pre-approval anytime.
Thank you,
Travis Tomlinson
Fifth Third Bank Cleveland, Ohio
Senior Mortgage Loan Representative
Kamm's Corner 3885 Rocky River Drive Cleveland, OH 44111
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City of
Lakewood Offers Interest Free Money
Would you like to live in wonderful LAKEWOOD, OHIO? If yes,
then read on to find out how to get free money from $ 7,500
to $ 14,000. The money is repaid upon sale of the property.
The City of Lakewood has interest free money for qualified
buyers. There are however some rules or requirements.
You must:
Follow the income guidelines listed below. Be a single parent,
displaced homemaker or not have owned a home for three years.
You must have 1 1/2 % of the sale price from your own funds,
plus your closing costs, which will be $2,200 to $ 2,800.
You must move in to the property. The home must pass an inspection
from the City of Lakewood building department and one from
the Community Development department. The house may not have
any paint chipping, cracking or peeling on the interior or
exterior. Your mortgage loan would have a LOWER INTEREST RATE!
Max gross Income / Household size
$ 33,700 1
$ 38,550 2
$ 43,350 3
$ 48,150 4
For more information contact:
Mary Lou Call
Loan Originator
First Federal of Lakewood
14806 Detroit Ave
Lakewood OH 44107
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Shedding Some
Light on Closing Costs and Pre-Paids
Shopping for a mortgage gets very complicated when different
banks and brokers fees don’t seem to match up. Fees
are as important as rate when it comes to shopping for a competitive
mortgage program. It is important, as a consumer, to ask for
Good Faith Estimates when shopping because that will show
you the fees that go along with the Interest rate quoted.
On a Good Faith Estimate there is room for the fees of a Broker,
Lender, and Title company. All of these fees combined are
termed “Closing Costs.” There is also space for
pre-paid taxes, insurance, and interest.
When trying to compare apples to apples with Good Faith Estimates
there are some key things to realize. First of all, a broker
or lender has no control over the title company’s costs
on a purchase. For this reason alone it is important never
to weigh options based on the total closing cost figure on
the Good Faiths. The only fees lenders control are their own.
Generally these include origination or broker, discount points,
processing, and rate lock fees. It is important that you ask
your Loan Officer who the different fees are being paid to,
so you can weigh your options appropriately. Loan Officers
have been known to lie about, or simply omit, title cost estimates
on a Good Faith. This makes their closing costs seem much
lower than they really will be. The fees lenders are collecting
or paying to the wholesale lender are the only ones they have
any control over, so you must ask which ones they are and
only weigh those fees against each other. The scary thing
about closing costs is that if you do not ask where the fees
are going you can be taken advantage of. The best deal out
there is not necessarily the one with the lowest bottom line
“Cash from Borrower” amount. By knowing where
your fees are going you can properly compare one option against
another.
Pre-paid taxes, insurance, and interest will be the same
no matter who the lender is. As long as you are paying your
taxes and insurance in your mortgage payment some will need
to be collected at Closing. There will be about 14 months
worth of Home Owner’s Insurance collected, unless you
pay for your first 12 months prior to closing. There will
be what works out to 2 months of taxes collected (Tax rates
vary depending on which city in the Cleveland Ohio area you're
purchasing in). You will be charged for more than 2 months,
but you will also receive a credit from the seller for the
taxes owed up to the date of transfer. So if 9 months of taxes
are collected, as the buyer, would receive a credit towards
those 9 months of about 7 months worth of taxes. Lastly, you
will be charged the interest per day you own the house in
the month you close. All of these pre-paids are collected
because you will never have a mortgage payment that covers
the month you close in. If you closed on February 15th, your
first payment would be due on April 1st and covers the interest
of March, and the taxes and Insurance of April.
Ultimately, it is important that you ask questions about
fees, so that you understand what they are paying for and
where they are going. Any lender who will not answer those
questions to your satisfaction is most likely not working
for your best interest. Weigh your options fee for fee not
just on the bottom line “Cash from Borrower” amount
because that number is easily manipulated, where as individual
lender fees are not. If you have any questions regarding more
details or about obtaining a mortgage in Ohio, please feel
free to contact me anytime. I'd be more than happy to explain
any or all of the home loan process with you.
Andrew Ginter
Consolidated home mortgage, serving all of Ohio.
^ Back to Index ^
ARM Loans
ARM stands for Adjustable Rate Mortgage. There are various
types of ARM products with the most common being the 1/1,
3/3, 5/1 and 7/1 ARM. The first number tells you the length
of time the Rate will be locked. The second number indicates
the length of the adjustment period after the initial rate
lock period. For example, the 7/1 ARM has the rate locked
for seven years or 84 months. Then it will adjust annually
thereafter. ARMs can be amortized over 15, 20 or 30 year time
periods which can allow for lower monthly payments.
One fear that most consumers have is that the rate can adjust.
However, most ARMs come with caps, which are usually 2% per
year or 6% over the life of the loan. This means, during the
first adjustment period, the rate can't go up or down more
than 2%. Let's look at the 7/1 ARM again. If the initial rate
is 5.25%, then the rate can't go higher then 7.25% at the
end of the initial rate lock period of seven years or 84 months.
ARM rates tend to be initially lower than fixed rate mortgages.
If you plan on only being in your home for 7 to 10 years,
lock in a 7/1 ARM and take advantage of the lower rate versus
a 30 year fixed rate mortgage. Everyone's situation is different,
but the average life of a mortgage loan ranges from 7 to 12
years because people often move or refinance their loan. So,
why not enjoy the lower rate?
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Credit
There are 3 credit bureaus who report a score. There is Experian,
Equifax, and Transunion. The scores range from 300-850. The
higher the score the better rate you will get. On your report
will show a score, credit, collections, and public records.
Make sure you check your report once a year to make sure it
is reporting correctly. Make sure you don't go over 50% of
the high credit. Make sure you don't make any late payments,
if you do, that will hurt your score.
For more information visit – Understanding
credit
Peggy A. Johnson
Sr Loan Officer
Royalview Mortgage
8050 Corporatte Circle, Suite 6
North Royalton, OH 44133
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Having Trouble With Your Income
In today’s social and economical environment there
are many individuals that have a tough time proving their
income. There are those that are self-employed, retired, paid
by tips or simply earn income under the table. With so many
restrictions being put on Mortgage Loans, what are these people
to do? Are they doomed to rent for as long as they have trouble
proving income? The answer is NO.
There are select lenders that will offer programs to qualified
customers that can get around proving income. Here at Milestone
Mortgage I specialize in customizing Home Loans and Refinances
geared to helping those that would otherwise not qualify for
a loan. It has been known for quite some time that people
with above average credit did not always have to prove their
income (stated income). However, I now have the means to offer
people with different credit profiles the same advantages
as well! Even if you do not claim all of your income, you
may still qualify for a home loan without having to pay an
arm and a leg in rate. You may even be able to borrow 100%
of the purchase price or appraised amount as well! There are
many programs out there to fit just about any credit profile.
My point is, don’t get discouraged if you have been
turned down because you could not prove your income. Call
me to get a free mortgage analysis and I will even waive my
application fee if you mention you saw me on Youshouldown.com
Also, if you would like some information in Spanish, let me
know, I am fully bi-lingual and have programs designed specifically
for the Hispanic Community.
One day out of Bankruptcy? Done it! Credit Score under 500?
Done it! Family member not living at the same house but wants
to Co-Sign? Done it!
Juan E. Ramirez
Milestone Mortgage in Medina, OH.
Loan Specialist
Local Corporate Accounts Manager
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Save Money on your Loan, Avoid PMI
With gas prices soaring and bills piling up it is important
to save money any way possible. The same is true when financing
a home. All loans are not created equal. Some loans have costs
that you should avoid. One of those costs is PMI. In my opinion
you should avoid this cost whenever possible!
Private Mortgage Insurance (PMI) is insurance that the lender
requires on loans that have less than 20% down payment. This
can cost you somewhere between 80-200 dollars per month! This
could put the house of your dreams out of your budget. Luckily,
in most cases, there are ways around these extra costs.
The best way to avoid PMI is to find a lender with programs
that finance above 80% with out charging PMI. At Fifth Third
Bank I have the ability to finance loans up to 100% without
charging PMI. These loans do have guidelines that you must
qualify for but if you do meet the criteria then take it!
You could end up in your home with no down payment and no
PMI. If you don't qualify for these programs don't worry,
there is another way!
You can also avoid paying PMI by doing an 80/20 loan. This
type of loan splits the financing up into two different loans.
You can think of this as borrowing money from the bank as
a down payment. You will be carrying two loans at two different
interest rates.
The first mortgage, which would make up 80% of the purchase
price, will be on a lower rate. The second mortgage will be
on a slightly higher rate, but your payment will be lower
than choosing a loan with PMI. The second mortgage is also
tax deductible. PMI is NOT tax deductible!
The name of the game is saving money! When you are shopping
around for a mortgage make sure you ask your loan officer
about special programs that avoid PMI. If you cannot qualify
for these then ask about their 80/20 programs. Mortgage shopping
can be confusing and frustrating, but it doesn't have to be.
Find a lender who wants to save you money. Good luck and happy
shopping!
Travis Tomlinson
Senior Mortgage Loan Originator
Fifth Third Bank – Westpark Branch
Cleveland, OH
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PMI: To pay, or not to pay?
What is Private Mortgage Insurance (PMI)? It is actually insurance
for your lender that protects them against the possibility
of you not paying the mortgage back. When is PMI applied?
If you are putting less than 20% there is a possibility that
PMI will be mandatory. What is the benefit to paying PMI?
In most cases there is absolutely no benefit at all.
The money paid towards PMI might as well be money thrown
in the garbage as far as a borrower is concerned. There are
2 ways to get out of PMI in situations where it would normally
be charged. The first is to use apply for mortgage programs
with Lender Paid Mortgage Insurance (LPMI). When this is done,
the cost is built into the Interest Rate of the mortgage;
however, the payment at a higher rate is usually less than
the lower rate with PMI. The second way is to break to mortgage
up into two loans, an 80% first mortgage and a 10%, 15%, or
20% second mortgage. In most cases this will also be cheaper
than one loan at a lower rate with PMI. In addition to savings
on your monthly payment you will also have more tax deductible
Interest paid on your mortgage, whereas PMI is not tax deductible.
So ultimately the cost in interest you pay to get around PMI
is tax deductible. So it is advantageous for multiple reasons
in most cases.
When is PMI necessary or even worth having? It is necessary
at times depending on a borrower’s credit scores and/or
debt-to-income ratios. LPMI options and second mortgages are
very much dependant on both of these. PMI is worth paying
on mortgages financing 85% of a purchase price, sometimes
even 90% in certain situations. Generally in these situations
the PMI is very minimal and it costs more in Interest Rate
then it is worth to get around it.
Can I get rid of the PMI I am paying currently on my Mortgage?
Depending on your current mortgage, and credit situation you
might be able to refinance into a loan program without PMI.
That could very well save you money every month.
The important thing is that you know as a borrower that there
are options with no PMI. As a Loan Officer I always show people
options with and without PMI so they see the differences.
Andrew Ginter
Consolidated home mortgage, serving all of Ohio.
^ Back to Index ^
Factors That Affect Interest
Rates
Interest Rates Are Determined By Bond Rates. Bonds are simply
promissory notes, which are purchased and sold to the public,
through the various stock exchanges. For example: Fixed Mortgage
rates are generally tied to the 30 Year Treasury Bond a debt
of the federal government that matures in 30 years. During
that 30-year period, it will yield a specific return say,
6.5%. If you believe that interest rates are heading downward,
you will pay more for this bond than you would pay if you
believe interest rates are going to increase. This is because
you believe that 6.5% looks like a better return on your investment
then you will get in the future when rates fall. If you believe
that rates are going upward, than the price of the bond will
decline because the bond will not be worth as much compared
to bonds, which will, when the rates go up, yield a higher
return.
When bond prices go up, interest rates go down. Investors
will pay more to lock in a higher rate when they feel that
future bonds will yield more than present bonds.
Bond investor’s decisions are generally based on one
overriding factor: fear of inflation. If inflation is feared,
investors will pay less for bonds because their current yield,
it is feared, will not keep up with the rates of inflation.
As fears of inflation ease, investors will pay more for bonds
in order to lock in the higher rates of the present.
Many factors influence investors in determining what they
will pay for bonds. While most factors relate to statistical
data from the U.S. Government concerning the general state
of the economy, some factors are more emotional. For example,
when there are rumblings of war in one sector of the world
or another, foreign investors seek to transfer their funds
to U.S. dollar instruments simply because the world assumes
that the United States is the most powerful and stable economy
in the world. Likewise, if a particular resource, which is
key to the U.S. economy, is threatened such as oil investors
might flee our currency market in favor of assets, which are
perceived to have more permanent value, such as gold. These
factors generally have a short-term effect on interest rates.
More common than world events, however, are the mundane reports
issued by our government. While no one statistic alone actually
determines the state of the economy, investors seem, like
butterflies, to focus on the latest report on one particular
sector or another. Set forth below, in general order of priority,
are the types of government statistics and the influence of
each.
1. Employment and Unemployment Statistics:
As unemployment claims diminish, the possibility of wage increases
grows, as employers compete for workers. With wage increases
comes increased inflation. When inflation occurs, money becomes
worth less. Investors therefore require higher returns on
their bonds, thus pushing bond prices lower and interest rates
higher. Recently, many economists have begun to take this
statistic with a grain of salt. Due to the growth of the so-called
world economy, jobs are being shifted abroad as never before,
thus easing the pressure to pay U.S. workers higher wages.
Employment statistics are usually released on the 1st or 2nd
Friday of each month.
2. Consumer Price Index: The CPI compares
relative price changes over time, based on a wide variety
of goods and services such as food, clothing, shelter, public
utilities and medical costs. As the CPI rises over several
months, inflation becomes apparent. Bond prices fall, and
interest rates rise. The CPI is usually issued monthly, on
a Friday in the middle of the month.
3. Producer Price Index: This index shows
changes in prices charged by producers of finished goods for
example, finished steel for refrigerators. These price increases
are sometimes (though, due to competitive pressures, are not
always) reflected in the price that the consumer ultimately
pays for goods. A trend if higher producer prices may indicate
later higher prices to consumers, thus fueling inflation.
The PPI is issued monthly, in the middle of the month.
4. Gross Domestic Product: The GDP is a
broad index of the entire output of the economy over a given
period of time. It is a very difficult index to compute, and
revisions are often made in hindsight after its issuance.
When the GDP index is accelerating, the fear is that we are
growing too quickly, with the increases in wages and prices
and inflation. The GDP is issued monthly, usually during the
last week of the month.
5. Retail Sales: This index reflects overall
consumer spending, including spending on autos and at department
stores. Strong retail spending can indicate long-term strong
demand for goods, leading to higher prices and inflation.
The Retail Sales report is issued in the middle of the month,
usually during the second week.
6. Housing Starts: For this index, which
is issued monthly, one's attention should always be directed
to the seasonally adjusted figures. Monthly figures can very
wildly, with substantial revisions being made in retrospect.
Due to the fact that housing developments are planned over
such a long period of time, statistics on housing starts don't
always give a revealing snapshot of the current economy. Reports
on housing starts are usually released between the 17th and
the 20th of each month.
7. Actions by the Federal Reserve: The Federal
Reserve influences interest rates by dictating the cost of
short term cash to banks. That is, banks have daily needs
to borrow cash from the government to meet their daily needs
for liquidity. When the Fed raises the cost of this cash (by
raising the interest rates the banks pay for this cash), banks
in turn immediately raise their interest rates. Interestingly,
when the Fed raises these short-term rates, long-term rates
(such as The 30 Year Treasury Bond) often fall. This is due
to the message that the Investment community hears from the
Fed's action: by slowing the economy through interest rate
increases, long-term inflation goes down.
Compliments of: Sean Anderson and Andrew Ginter Consolidated
Home Mortgage 398 W. Bagley Rd., Suite 216 Berea, OH. 44017
^ Back to Index ^
Working with
a Broker
When shopping for a mortgage rate to purchase a home in the
Cleveland Ohio area, there are always questions. The most
common question is how much house is affordable. Even before
talking to a Realtor or looking at homes, you will want to
know that answer. It is a mortgage broker’s responsibility
to take your application either over the phone, or in person
and shop nationwide with lenders. The broker looks on the
internet to find the borrower several different loan options
based upon their inquiry, and to give the borrower a certified
answer on what they can afford in a mortgage. Real estate
comes in all shapes and sizes and so do home loans.
Working with a mortgage broker increases the probability
that you’ll get a loan program that is compatible with
you. The Broker through its network can find top lenders all
over the United States. These lenders offer thousands of different
financing programs. The broker will work to get a mortgage
option within your price range. They will recommend one or
more loan programs that consistently fit your financial goals.
Why should you call a Mortgage Broker? Because working with
a broker gives the borrower access to a nationwide search
of bank loan products. They are in a position to give you
information on the lowest mortgage rate, and an explanation
and description of how the financing process works. You’ll
be able to know if you’re getting the best deal, and
you can compare and rank the loan so you’ll know if
you can trust the company with whom you have called. In addition
you will receive a certification from the broker that shows
you have been qualified to purchase a home within a certain
price range that you can give to your Realtor and start house
shopping! Feel free to give me a call anytime with any questions,
My office is conveniently located in Downtown Cleveland.
Leesa Hastings
Great Lakes Residential
Downtown Cleveland
^ Back to Index ^
Basic Mortgage / Loan Terms
Adjustable Rate Mortgage (ARM)
A mortgage that interest rates change over time. Rate changes
are made at prescribed times and within prescribed limits
(caps) as defined in the mortgage contract.
Amortization
The gradual repayment of a mortgage by installments.
Annual Percentage Rate (A.P.R.)
The interest rate reflecting the cost of a mortgage as a yearly
rate. This rate is likely to be higher than the stated rate
on the mortgage because it takes into account points and other
credit costs.
Appraisal
An opinion of value of a property, made by a qualified "appraiser".
An appraisal and market value are two different things. Appraisers
base their value typically on other similar homes that have
sold recently in the same area. Only buyers determine what
a home is really worth. If an appraiser doesn’t agree
however, it could be a factor in securing a mortgage loan.
Appreciation
An increase in value due to changes in market conditions or
other causes. Homes typically appreciate 1-3% a year in a
stable to good market.
Assumption
The transfer of the seller's existing mortgage to the buyer.
The buyer then assumes the mortgage.
Balloon Mortgage
Usually a short-term fixed-rate loan which involves small
payments for a certain period of time and one large payment
for the remaining amount of the principal at a time specified
in the contract.
Buy-Down
When the lender and/or the home builder subsidized the mortgage
by lowering the interest rate during the first few years of
the loan. While the payments are initially low, they will
increase when the subsidy expires.
Closing
The occasion where a sale is finalized; the buyer signs the
mortgage, and closing costs are paid. Also called "settlement."
Commitment
A promise by a lender to make a loan on specific terms to
a borrower.
Construction Loan
A short term interim loan for financing the cost of construction.
The lender advances funds to the builder at periodic intervals
as the work progresses.
Contingency
A condition that must be met before a contract is legally
binding.
Debt-to-Income Ratio
The ratio, expressed as a percentage, which results when a
borrower's monthly payment obligation on long-term debts is
divided by his or her gross monthly income.
Deed
The legal document conveying title to a property.
Default
Failure to meet legal obligations in a contract, specifically,
failure to make the monthly payments on a mortgage.
Delinquency
Failure to make payments on time. This can lead to foreclosure.
Depreciation
A decline in the value of a property; the opposite of "appreciation."
Down Payment
Money paid to make up the difference between the purchase
price and the mortgage amount.
Earnest Money
Given by buyer to seller as part of the purchase price to
bind the transaction.
Equal Credit Opportunity Act (ECOA)
Federal law that requires lenders and other creditors to make
credit equally available without discrimination based on race,
color, religion, national origin, age, sex, marital status
or receipt of income from public assistance programs.
Equity
The value an owner has in real estate over and above the loans
against the property.
Equity Loan
A loan based on the borrower's equity in his or her home.
Escrow
Refers to a neutral third party who carries out the instruction
of both the buyer and seller to handle all the paperwork of
settlement or closing. Escrow may also refer to an account
held by the lender into which the home buyer pays money for
tax or insurance payments.
Foreclosure
Legal process by which the lender or the seller forces a sale
of a mortgaged property because the borrower has not met the
terms of the mortgage.
Fixed-Rated Mortgage
A mortgage on which the interest rate is set for the term
of the loan.
Jumbo Loan
A loan which is larger than $322,700.
Lien
A legal claim against a property that must be paid when the
property is sold.
Loan-to-Value Ratio
The relationship between the amount of the mortgage loan and
the appraised value of the property, expressed as a percentage.
Lock-In
A written agreement guaranteeing the home buyer a specified
interest rate provided the loan is closes with that buyer
within a set period of time. The lock-in also usually specifies
the number of points to be paid at closing as well.
Mortgage Insurance (Private Mortgage Insurance -
PMI)
Money paid to insure the mortgage when the down payment is
less than 20 percent. Insurance provided by a non governmental
insurer that protects lenders against a loss if a borrower
defaults.
Mortgagee
The lender.
Mortgagor
The borrower / homeowner.
Negative Amortization
Occurs when monthly payments are not large enough to pay all
the interest due on the loan. This unpaid interest is added
to the unpaid balance of the loan.
Origination Fee
The fee charged by a lender to prepare loan documents, make
credit checks, inspect and sometimes appraise a property;
usually computed as a percentage of the face value of the
loan.
Owner Financing
A purchase in which the seller provides all or part of the
financing.
PITI
Principal, Interest, Taxes and Insurance. Also called monthly
housing expense.
Points (loan discount points)
Prepaid interest assessed at closing by the lender. Each point
is equal to 1 percent of the loan amount.
Power of Attorney
A legal document authorizing one person to act on behalf of
another.
Pre-Payment
A privilege in a mortgage permitting the borrower to make
payments in advance of their due date.
Pre-Payment Penalty
Money charged for an early repayment of debt. Make sure to
ask your lender if there is one before signing loan documents.
Principal
The amount of debt, not counting interest, left on a loan.
Refinancing
The process of paying off one loan with the proceeds from
a new loan secured by the same property. This is most often
done to get the better interest rates offered by the new loan.
Second Mortgage
A mortgage made subsequent to another and subordinate to the
first one.
Title
A document that gives evidence of an individual's ownership
of property.
Title Insurance
A policy, usually issued by a title insurance company, which
insures a home buyer against errors in the title search. The
cost of the policy is usually a function of the value of the
property, and is often borne by the purchaser and/or seller.
Title Search
An examination of municipal records to determine the legal
ownership of property. This is usually performed by a title
company.
Underwriting
The decision whether to make a loan based on credit, employment,
assets, and other factors and the matching of this risk to
an appropriate rate, term & loan amount.
^ Back to Index ^
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